What you need to know about the federal debt ceiling, and why you should care

September 7, 2017 at 6:35 PM EDT

227007227020227020What you need to know about the federal debt ceilingAn agreement between President Trump and Democrats for a three-month extension for the debt ceiling means Congress temporarily ducks a political debate. But the recurring battle will surface again in December. What could happen if we don’t raise the debt limit? Lisa Desjardins explains the history of the debt limit and how it works.2017-09-07 06:00 pmdisabled3004442810L3ZZ-Rqzcjsfalse228733228706http://www.pbs.org/newshour/bb/dramatic-hearing-graham-cassidy-health-care-bill-seems-dead/After dramatic hearing, Graham-Cassidy bill seems deadThe Graham-Cassidy health care proposal got a hearing in the U.S. Senate on Monday -- the first time this year a health replacement plan has been the subject of any hearing on Capitol Hill -- but passage of the latest GOP push to overhaul the Affordable Care Act is far from certain. Lisa Desjardins sits down with Judy Woodruff to discuss what happened and why the bill may be dead in the water.2017-09-25 06:00 pmhttp://d3i6fh83elv35t.cloudfront.net/newshour/wp-content/uploads/2017/09/RTS1DQVL-320x196.jpg3005051765BLja4AFUTiE228730228708http://www.pbs.org/newshour/bb/trump-gain-politically-attacking-nfl-players/What does Trump gain politically by attacking NFL players?Amy Walter of the Cook Political Report and Tamara Keith of NPR sit down with Judy Woodruff to discuss what’s at stake in the fight to repeal the Affordable Care Act, the inter-party fight animating the Alabama Senate race and whether the feud President Trump has started NFL players helps him with his base.2017-09-25 06:02 pmhttp://d3i6fh83elv35t.cloudfront.net/newshour/wp-content/uploads/2017/09/politics-3-320x196.jpg3005052120bL6MUeoGycg228611228612http://www.pbs.org/newshour/bb/central-mexico-earthquake-survivors-face-extensive-damage/In Mexico, earthquake survivors face extensive damageMexico’s government said Sunday that 318 people died from last week's major earthquake, including 180 people in Mexico City, where dozens of buildings collapsed. Outside the city, residents of rural towns and villages are assessing massive damage to their homes and businesses. NewsHour Correspondent William Brangham spoke with residents of several communities about what comes next.2017-09-24 01:35 pmhttp://d3i6fh83elv35t.cloudfront.net/newshour/wp-content/uploads/2017/09/RTS1DHFC-320x196.jpg3005019272gGnPfKAKw_E

An agreement between President Trump and Democrats for a three-month extension for the debt ceiling means Congress temporarily ducks a political debate. But the recurring battle will surface again in December. What could happen if we don’t raise the debt limit? Lisa Desjardins explains the history of the debt limit and how it works.

JUDY WOODRUFF: As you just heard in that discussion with Senator Durbin, a three-month agreement between Trump and — President Trump and congressional Democrats to raise the debt ceiling means Congress ducks a political debate that has dogged them in the past.

But, in December, that recurring pitched battle will surface again, which leads us to ask, what is the debt ceiling, and where did it come from?

Lisa Desjardins puts it in context.

LISA DESJARDINS: Let’s start with how the debt ceiling works.

It sounds obvious, like the Capitol dome, an absolute height limit on debt. But the truth is, it doesn’t work that way. The U.S. government is the largest spender on Earth, trillions of dollars a year. But the U.S. doesn’t bring in as much as it spends. So, each year, we borrow the difference and we keep adding to our debt, also the largest on Earth.

The debt limit says borrowing must go no higher than here. The problem? In reality, the spending was already in motion, workers’ salaries, weapons delivered, buildings built, programs under way. If we hit the debt limit, the spending has already happened, but it would just mean the U.S. couldn’t pay some of the bills that are due, including loan payments, leading to default.

And that would be dramatic.

ACTRESS: So, this debt ceiling thing is routine, or the end of the world?

ACTOR: Both.

ACTRESS: OK. That’s it. Thanks, everybody.

LISA DESJARDINS: What could happen if we don’t raise the debt limit? Well, the U.S. wouldn’t be able to pay all of its bills, and that could include paying its loans.

Defaulting on U.S. loans would have dire consequences, changing our nation’s good credit rating and sending out a financial wave that could raise mortgage and other rates. That wasn’t the idea at the start.

Debt limits began in World War I, in an effort to give Treasury more power. The debt limit let Treasury take on loans up to a certain level, and that level was initially set relatively high above debt needs. After World War II, the limits became tighter, and Congress had to vote nearly every year to raise them.

Then came the 21st century. Starting in 2001, a jump in spending and in deficits sparked years of debt concern. Standoffs in Congress over the debt ceiling became so regular, they were parodied.

ACTOR: Questions for Mr. Ryan. Would you vote to raise the debt ceiling?

ACTOR: Well, as the late, great Lionel Richie once said, oh, what a feeling. I am dancing on the debt ceiling.

LISA DESJARDINS: So, that all brings us to now and one other important point about how the debt ceiling works. When exactly do we hit it? How do we know?

This gets me to one of my favorite debt ceiling facts. The national debt is tracked every day, to the penny, by a small group of Treasury workers in Parkersburg, West Virginia.

Those workers in West Virginia, when we hit the debt ceiling, have a tricky job. They move things around to keep us technically under the debt limit, holding off on some investments, waiting to issue some internal debt. These are called extraordinary measures. Sometimes, Treasury can keep the U.S. hovering right at the debt limit for many months using this fiscal slight of hand.

But, of course, it is just a delay tactic, until Congress and the president agree to push up the debt limit again.

So, one conclusion? We have a new inevitable. To death and taxes, now add the U.S. continually bumping up against its debt ceiling.

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